If you really want to help your adult kids and grandkids, give them money while you're still alive

By Richard Eisenberg

How to manage 'giving while living' without endangering your own retirement

Instead of leaving an inheritance, some retirees might want to consider making gifts while they're still alive to their adult children and grandchildren.

Amy Allen's estate plan isn't focused only on where her money will go when she dies. The Georgia mom wants to put some of it to work now.

Her 21-year-old son is getting married soon, and Allen and her husband plan to give him cash toward the purchase of a house.

"We are in a spot where we can help," she said. "If your kids are really in need, I don't think there's a reason to wait."

Although leaving bread when you're dead gets most of the attention, baby boomers, Generation X and financial advisers could look at a more helpful, immediate alternative: giving while living.

Roughly $79 trillion is expected to transfer from boomers to their heirs by 2048, according to Cerulli Associates, an asset-management research firm. You may have heard of this phenomenon, known as the "great wealth transfer."

Instead of waiting until death to leave your loved ones money, giving while living lets you help your adult children and grandchildren financially now, or in the near future, when they could truly use the assistance. Any money left over can become an inheritance one day.

Yet in a 2024 Charles Schwab survey, 45% of boomers with $1 million or more in investible assets said they want to enjoy their money for themselves while they're still alive. That could disappoint many millennial and Gen Z adult kids. A recent Kiplinger-Morning Consult survey found nearly twice as many adult children preferred that their parents help them financially now rather than giving them a larger inheritance later.

Giving while living

There are plenty of reasons so many people could use immediate, tax-free gifts from their boomer and Gen X parents. The median net worth for people in their 30s is $28,616, according to Empower, and their median liquid savings is $7,000, according to the Federal Reserve. Steep housing prices and mortgage rates have put homes out of reach for many young adults. College tuition is also through the roof and expected to continue rising, putting some 43 million Americans in debt for an education.

Giving while living might help your adult children to afford a home, be it a house or an apartment, or to stay afloat after a job loss. Putting money into a 529 college savings fund for a grandchild could make higher education attainable for them.

"Giving while living can be very meaningful in the moment," said Laura Varas, CEO of Hearts & Wallets, a wealth-management market research firm. "It's very hard for people in their 20s and 30s to make ends meet."

Varas, a Gen X-er, knows this personally. She just gave her daughter roughly $5,000 toward a down payment on a London apartment. "For her, being able to be in a roach-free, slightly-bigger-than-a-matchbox apartment has a lot of utility," Varas said. "I'm sure she's very grateful for it, and it makes me feel good."

That's how my wife and I see it, too. We expect to help one of our sons with a down payment on a home in Los Angeles once he has enough savings for the monthly payments. We've also been regularly contributing to 529 plans for our other son's two young children, which we plan to continue.

Roughly 27% of boomers financially support their children, up from 12% in 2015, according to Hearts & Wallets. Some boomer and Gen X parents and grandparents, however, are hesitant, fearing doing this could endanger their own financial security if they run into steep healthcare or long-term-care costs.

If you're one of them, or you're unsure about the best ways to lend a hand to your adult kids or grandkids, here's what experts suggest.

Determine whether you can afford to give

Running out of money is a common fear among current retirees and near-retirees. "We often hear, 'I don't want to jeopardize my retirement,'" said Jessica Ray, a Washington, D.C., senior growth adviser with Brighton Jones, a wealth-management firm.

Sandy Goldman, author of "The New 65: Rewiring, Not Retiring" and founder of the "65Nation" newsletter, calls this everyone's biggest fear about giving while living.

"Basically, you've got to come to the conclusion that you have X dollars to live on and that you're going to bequeath, so what is the amount you could live without?" he said. "You just have to make that leap of faith to feel you can cover the worst-case scenarios and still be able to share what you have now."

To ease nerves about giving large amounts of money while you're still alive, dig into the numbers. Create a budget for current and anticipated expenses, including your financial goals and intended care plan. Next, estimate a higher-than-anticipated inflation rate and a lower-than-expected stock-market performance. "Then we see where we end up," said Ray of Brighton Jones.

When people tell Ray they're not ready, or able, to give money to their adult children or grandchildren, she suggests they read the bestseller "Die With Zero: Getting All You Can From Your Money and Your Life" by Bill Perkins, a multimillionaire hedge-fund manager. Perkins, 57, is a big proponent of giving adult kids money when it can have "a maximum impact in their life," rather than only after the parents die.

If you also expect to leave money to your children in a will or trust, you might want to explain to them that your assistance now will reduce their inheritance later. That's what Georgia retiree Mel McGill told his kids. "They understood that my help was not free money," he said.

Decide when to do your giving

Have conversations with your adult children about what you're thinking, what would be helpful to them and when.

Put some of the responsibility on your kids, Ray said. "Have them make a budget and quantify what they need. Then review it with them, and make sure you feel good about the plan," she said.

Be sure you know your child's full financial situation so you can avoid making an unnecessary gift. For example, Ray said, before contributing to a grandchild's 529, check to see whether other family members or relatives are taking care of that. If so, you might want to help out another way.

The best times to assist your children financially may come at different points in their lives.

Two years ago, when one of McGill's sons sold his home and couldn't afford to buy and make mortgage payments on another one because prices had risen so much, McGill let him move into one of his own rental properties and pay rent. More recently, when McGill's daughter needed money for a down payment on a place whose monthly payments she could manage herself, dad obliged.

Choose how you want to give

You might prefer to loan money and receive regular payments, rather than making a no-strings gift. If the loan is over $10,000, be sure to charge at least the IRS's applicable federal rate: currently 4.25% for up to three years, 4.61% for three- to nine-year loans and 5.22% for loans over nine years.

If you have more than one child, don't confuse equality with fairness. It's only human for a parent to want to help one child when he or she loses a job while also worrying about being unfair to a sibling. "I think it's important to feel like you can help whoever needs the most amount of help and know things will self-adjust over time," Ray said.

If you're considering giving a child $20,000 or so, you may want to trim your generosity to $19,000 in 2026. That way, your gift will be below the threshold reducing your federal estate-tax exemption. (A married couple can give up to $38,000 to an individual in 2026.) The unified lifetime exemption is $15 million per individual in 2026.

Financial advisers could do a better job helping people incorporate giving while living, Varas said. According to her firm's research, less than a third of advisers whose clients have adult children talk with them about this type of assistance.

If you have a financial adviser, you may want to arrange a meeting that includes your adult child to discuss specifics about making gifts wisely.

Once you start giving while living, you'll likely find it's a wonderful way to leave a legacy. "It's more blessed to give than receive," said Allen. "You can't put a price on it."

-Richard Eisenberg

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